What obligations of the Carls franchisee do the Guarantors guarantee?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- **1.
Guarantee To Be Bound By Certain Obligations.** Guarantors hereby personally and unconditionally guarantee to CJR and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement or at law or in equity, that each will be personally bound by the restrictions contained in Section 20 of the Agreement.
- **2.
Guarantee and Assumption of Franchisee's Obligations.** Guarantors hereby: (A) guarantee to CJR and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement or at law or in equity, that Franchisee and any assignee of Franchisee's interest under the Agreement shall: (1) punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement and (2) punctually pay all other monies owed to CJR and/or its affiliates; (B) agree to be personally bound by each and every provision in the Agreement, including, without limitation, the provisions of Sections 20 and 25; and (C) agree to be personally liable for the breach of each and every provision in the Agreement.
B.** Each of the undersigned consents and agrees that: (1) his direct and immediate liability under this Guarantee shall be joint and several; (2) he shall render any payment or performance required under the Agreement if Franchisee fails or refuses punctually to do so; (3) such liability shall not be contingent or conditioned upon pursuit by CJR of any remedies against Franchisee or any other person; (4) such liability shall not be diminished, relieved or otherwise affected by any amendment of the Agreement, any extension of time, credit or other indulgence which CJR may from time to time grant to Franchisee or to any other person including, without limitation, the acceptance of any partial payment or performance or the compromise or release of any claims, none of which shall in any way modify or amend this Guarantee, which shall be continuing and irrevocable during the term of the Agreement and for so long thereafter as there are monies or obligations owing from Franchisee to CJR or its affiliates under the Agreement; and (5) monies received from any source by CJR for application toward payment of the obligations under the Agreement and under this Guarantee may be applied in any manner or order deemed appropriate by CJR. In addition, if any of the undersigned ceases to be a member of the Continuity Group, a 10% Owner, an officer or director of Franchisee or own any direct or indirect interest in Franchisee or the Franchised Restaurant, that person (and his spouse, if the spouse is also a guarantor) agrees that the obligations under this Guarantee shall continue to remain in force and
effect unless CJR in its sole discretion, in writing, releases those person(s) from this Guarantee. Notwithstanding the provisions of the previous sentence, unless prohibited by applicable law, the obligations contained in Section 17.C. of the Agreement shall remain in force and effect for a period of 2 years after any such release by CJR. A release by CJR of any of the undersigned shall not affect the obligations of any other Guarantor.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls FDD, the Guarantors provide a guarantee to CJR, which covers several key obligations of the franchisee. The guarantors are personally bound by the restrictions outlined in Section 20 of the Franchise Agreement, which likely pertains to operational standards or competitive conduct.
Furthermore, the Guarantors ensure that the franchisee (or any assignee) will punctually fulfill every commitment, agreement, and covenant detailed in the Franchise Agreement. This includes timely payment and performance of all obligations. The guarantee also extends to ensuring the franchisee punctually pays all other monies owed to CJR and/or its affiliates. The guarantors also agree to be personally bound by every provision in the agreement, including sections 20 and 25, and agree to be personally liable for any breaches of the agreement.
This guarantee remains in effect for the entire term of the Franchise Agreement and beyond, as specified in the agreement or by law. This ensures that Carls has recourse should the franchisee fail to meet their financial or operational responsibilities. The obligations of the Guarantor remain even if they cease to be a member of the Continuity Group, a 10% Owner, or an officer/director of the franchisee, unless CJR provides a written release. Even with a release, obligations under Section 17.C of the agreement remain in effect for two years, unless prohibited by law.
These stipulations are typical in franchising, as they provide the franchisor with added financial security and recourse in case of franchisee default. Prospective Carls franchisees should carefully review the Franchise Agreement and Guarantee to fully understand the obligations and potential liabilities of the guarantors.